Why is the price of Gold falling even though stocks and the dollar are falling as well?
Answers
474 points
spider348 answered 8 months ago …
A couple of thoughts. The US dollar has been rocketing north recently (since July). The dollar in recent years been trading inversely (negative correlation to gold). So stronger dollar, weaker/less interest in gold. Secondly, gold is typically traded on paper (derivatives) and it is speculated that the extreme volume of gold paper from the big '08 parabolic rally is still being unwound. In other words, large investors are still trying to get out of gold because of the sharp sudden increase in the dollar among other things. Just one possible scenario. Great question.
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3680 points
MNSL answered 8 months ago …
Prices of Commodity stocks and commodity prices will go down further. Now if you are a long term investor you can buy some gold stocks for deeply discounted prices. In some countries some gold
stocks have gone down by more than 75%.
We can see next trend in commodity market only in end of 2010.
I think commodity bear market will be longer than stock market.
102 points
triluk answered 8 months ago …
I'll answer it with another question. 2 weeks ago I went to my bank and asked them to show me the drawer in which they usually hold their gold coins.
It was not available anymore. They had "stopped" it the cashier said.
In the past from behind the cashiers window I could look at the choices they had. A Few months ago I traded recent Eagles for nicer looking Nuggets (nice shine) and a 1924 St Gaudens.
So I could not buy anymore gold coins in my bank. I went to another one. Dexia in Luxembourg.
The receptionist brought me to a person at a desk , he called somebody and came back with the same answer "we don't have any gold coins in stock anymore"! I went to a third bank in Luxembourg.
BCL. Same answer. They didn't have any gold coins in stock anymore either. The girl at the reception desk said: "You don't know what's been going on lately?"
I desperately wanted another gold coin. At Dexia they had told me then that there was a shop at a certain address that might have gold coins. I have been there too and indeed they had gold coins but nothing that interested me particularly at that moment. Maybe 50 pieces in total, a mixture of a bit of everything , nothing special.
But since I desperately wanted to buy a gold coin I went back the week after. Everything gone. Only 3 pieces left ... nothing special left as there was nothing to start with. Anyway.
So for a month I have been trying to buy "gold" , prices keep on going down and I can't get any because everything is sold out.
Something smelly somewhere !
My question: "How can prices go down if it is proven that demand (my also proven experience) is up ?
543 points
warren answered 8 months ago …
Here is something I wrote on the Tycoon Website and it may help in answering your question and confirm triluk's comments. Go look for yourself you will see gold is not down as much as it looks.
With all that is bad in the world today the goal of any investor should be;
1. To preserve existing wealth
2. To grow and build new wealth
This is a daunting task to say the least. I could go into a long diatribe here describing historic methods of preserving wealth but the fact is they all lead to one. Precious Metals.
Gold and silver have and will continue to serve as the best wealth protection vehicle.
Then why have they gone down so much lately in the face of this extreme financial crisis?
Well the fact is they haven’t!
Paper or futures prices have been the sacrificial lamb of late. But dealers are selling physical bullion for much higher prices. The highest price I have seen is over $1,400 for an American 1oz. gold eagle and $35 for a 1 oz. silver eagle.
This strange and wide deviation will soon come to an end. I believe the December Comex futures month will command so much delivery of the physical metal that shorts will have to default in what is termed “force majeure”. Long contract holders will not get the physical gold, they will be paid in paper dollars whose value will become worth less and less over time. This annuls the objective of hedging a weak currency with a gold futures contract.
Players will then rush to buy physical gold and silver in droves and will be shocked to find there is hardly any available and what is available has normally a two month wait period for delivery if you are lucky. The price will be then set by physical buying, which is already far above all time highs.
Investors looking for protection against inflation and financial turmoil will be up the creek without any options except for one.
Small bullion purchases will be available on eBay and select bullion dealers but for any size there will be no go.
The only other option is to buy the shares. The large cap equities offer tremendous value right now and will be accumulated heavily in the very near future. The prices will be driven two or three fold in fairly short order. Investors will not want to buy at such lofty levels so they will begin to look to the very hard to analyse junior and exploration companies. The good companies in this realm will easily see returns of 1000% and is some quality cases the sky is literally the limit.
Many of the companies are trading below cash but more importantly they are virtually trading no bid. One company I hold which has a real project of fantastic quality and has provided great drill results lately with over 200m solid mineralization traded zero shares the other day.
The volatility is unprecedented and these equities may in all likelihood come down further but to buy them in any size at all will drive the price up sharply. Just wait until people are actually interested in these.
Please sign up for my free weekly newsletter where I don’t give company names but I do provide technical analysis and fundamental analysis for the precious metals sector. This is the sector to be in for the foreseeable future. Now is the time to get into precious metals before the default, which will force so many others to jump on board.
Have a great day and most of all protect what you have.
Sincerely,
Warren Bevan
www.preciousmetalstockreview.com
104 points
InvestorsDailyEdge answered 7 months ago …
It's not that gold has lost its luster. But institutional investors were forced to sell gold to meet margin calls.
But make no mistake about it. With the market crashing and dozens of governments printing money like there's no tomorrow, investors want to be in gold.
Before the sell-off, the price of gold was up more than 20 percent following Lehman's collapse.
The demand for physical gold last month surged to what one trader calls "unprecedented" levels. The U.S. Mint has doubled its gold-coin production but it hasn't been enough.
Gold dealers have had to turn away customers wanting to buy coins and bars.
But it's the physical demand (for jewelry) that ultimately decides the price of gold. Jewelry demand accounts for 60 percent of total gold demand and it's down so far this year.
Will it pick up? Gold production today is lower than it was in 2000.
Gold is rarer than ever. The markets are going to hell. It's gold's time.
http://www.investorsdailyedge.com/Article.aspx?Id=1216
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